Special Committee on the Companies (No. 2) Bill, 1987 debate -
Tuesday, 29 May 1990

SECTION 189.

Question proposed: "That section 189 stand part of the Bill."

Mr. J. Bruton

I am referring here to section 189 (2) (a) which relates to a statement that the auditor shall circulate if he is resigning, stating the circumstances in which he has resigned. This is quite an important statement because if the auditor resigns because of some malpractice in the company that he is not prepared to continue to condone, that should be brought to the attention of the members of the company and their creditors as quickly and as fully as possible. I would like to be satisfied that the auditor would enjoy some measure of privilege in making such statements against being sued for libel.

I could not exactly formulate a proposal, but it seems to me that if these statements are to be useful, auditors must be able to tell it as it is, but they will not tell all if they find they are liable to be sued, or they will be gagged by the threat of legal action by the company or by directors of the company. I would not put them in the same situation as Members of the Dáil, for instance, in giving them absolute privilege but some form of qualified privilege, similar to that enjoyed, say, by members of a county council, should be given to them. If they are not making that statement for personal gain, but in the public interest, they should be protected against being the victims of a libel action, simply because they were factually inaccurate, if acting in good faith. I would be interested to hear the views of other Members of the Committee with greater practical knowledge of the way in which this branch of the law operates. I believe that protection of this kind should be given.

Mr. Roche

This raises a very interesting principle. Sometimes a whistle-blower, to use the American term, can actually be operating in the public good rather than in the sense of being vindictive or spiteful. Yet in our law a person who wishes to blow the whistle on some practice which is nefarious or illegal could feel threatened by serving the public good. It would be a good principle if an auditor or some other officer who felt he had to make some statement, and he was making it in good faith, having tried to establish that all the facts were as he is portraying them, that those facts had a negative impact on the company, could be protected in some way.

Mr. O'Dea

They are protected by the general law of libel and slander. Statements made in good faith and with absence of malice are not actionable. Libel, is something which is by definition, deliberate. You are deliberately setting out to slander people, to take away their character etc. It would be difficult to write this protection of privilege into the Bill. It is something that should not be extended, except for very good reason. I have seen the sort of reports auditors do. Generally speaking, if the auditor, who is a qualified person and knows the affairs of the company, examines the returns in the books and the accounts from all the branches of the company etc., I believe that in relation to the sort of statements which is envisaged here, he would be protected by the general law of libel. It is sufficiently wide to protect him.

Mr. J. Bruton

I have seen the news-papers in recent days issue apologies to various people for things they said. I could not understand why they did it in the sense that what they had said was, I would have thought, fair comment. I do not want to go into any of these cases. There is more than one and they affect different people. Those remarks could have been construed to have been fair comment in some cases. Yet the paper, which is a financially strong institution, felt it necessary to do this because of the fear of the way the courts might interpret the libel laws. I take Deputy O'Dea's point. Is it not the case that if somebody makes a statement which someone else challenges as being a libel, it is up to the person who made the statement to substantiate it in full and if he fails to do it, he fails to defend himself against the position?

Chairman

The point is as Deputy O'Dea outlined it. Once he gives his auditor's report in good faith, or he gives his reason for resigning in good faith, he does not have to substantiate anything. Nobody can take an action against him; from a practical point of view, the resignation of an auditor would be the final step. He would be going out on very sure grounds if he were to make a statement. He would be resigning on facts within his own knowledge as being such that would necessitate distancing himself from the company. As Deputy O'Dea pointed out, the good faith ground covers him in relation to any libel or slander. It is not the same as a columnist making a blunder or putting a gloss on something which might put in question the constitutional integrity of someone applying for a position in the future. The point I am making is that there is a fiduciary relationship between the auditor and the company and he will not take that step of resigning unless he is on very sure ground. You can be sure that anything he will notify to the members or the creditors will be facts which can be substantiated and which are undeniable. Because of the seriousness of such a move by an auditor and the fact he is acting in good faith, he is more than covered, in my opinion. He need not worry because obviously the people coming after him would have very clean hands themselves.

Mr. J. Bruton

I think we will see more resignations of auditors in the light of the provisions of section 200 which involves personal liability of auditors in certain circumstances. It could be a more common occurrence than we thought.

Chairman

Is the section agreed?

Mr. J. Bruton

The Minister has not had an opportunity to reply to the points made and I would like to hear his considered response.

Mr. Leyden

I have very little to add to what has been said by the Chairman, Deputy O'Dea and Deputy Bruton in this regard. It is an area where I would be reluctant to give privileges to auditors or limit them or otherwise. I think when they decide to make a statement and resign, they would only do so on very strong grounds. I would be fearful of giving any such privilege, limited or otherwise, to auditors in that regard. There is reason not to have the privilege; if an auditor had some personal reasons for making a statement which could be damaging, I would be concerned about the other side. It is the responsibility of a professional person to have due regard to their position in making a statement and if it is made with the best of intentions no court would take them asunder. If, however, they abuse the privilege to do damage because of personal difference or other reasons, then it would be dangerous and could be abused. The point has been well made and it is well taken. On section 200, we will be dealing with responsibilities and liabilities of auditors, and that is something we can go into at that stage.

Question put and agreed to.

Section 190 agreed to.

Progress reported: Committee to sit again.

The Committee adjourned at 5.25 p.m. until 3.45 p.m. on Thursday, 7 June 1990.